Semiconductor stocks, including Nvidia (NVDA) and Qualcomm (QCOM), have been soaring this year. But has the group come too far too fast?
Bay Crest Partners technical analyst Jonathan Krinsky thinks so.
There’s little doubt that semiconductor stocks have had a spectacular 2019. The iShares PHLX Semiconductor ETF (SOXX) has gained 40% so far this year, while the VanEck Vectors Semiconductor ETF (SMH), the most heavily traded semiconductor ETF, has climbed 41%. The SPDR S&P Semiconductor ETF (XSD) has rallied 45%. The S&P 500 has gained 20% in 2019.
Krinsky, being a technical analyst, doesn’t have a problem with the semiconductor stocks per se—he’s still a fan of Marvell Technology Group (MRVL), Cirrus Logic (CRUS), and Maxim Integrated Products (MXIM)—but he is worried about how far the group has come. One way to judge that is to look at where a stock or index trades relative to its 50-day moving average. After gaining 40% in 2019, the PHLX Semiconductor Index now sits nearly 14% above that moving average, the most since the stock market bottomed in 2009.
That doesn’t mean semiconductor stocks are headed for a fall, but it does mean that they could be ready for a pause. “[At] a minimum, we are likely to see some consolidation from here in the overall index, even if they ultimately push higher,” Krinsky writes. “[Tactically] its perhaps not the best time to pile in.”
As for Marvell, Cirrus, and Maxim? “We would not be surprised to see better entry points than here and now,” Krinsky writes.
